The $60bn hedge fund scam as well as being a massive waste of resources – enough to pay for a clean water supply for every poor person on the planet – will bring further problems for the financial markets.

It was quite incredible that such a fund should be the home for investments for banks such as the RBS and HSBC. These are funds for wealthy individuals who can afford to lose all their investments. Not High Street banks who are largely funded by ordinary peoples’ savings, wages and loans.

Ironically most of these funds are registered and have their assets in jurisdictions which come under British rule. The loose financial, criminal and civil legislation which govern these offshore tax havens has to be signed off by no other than the privy council in the UK. Another example of Britain undemocratic crown powers. So while Brown may bleat about the speculators he is using crown powers to give these hedge funds the framework to make speculative, or in this case false, money.

Hedge funds have had their worst year since their inceptions with hundreds of billions of dollars being withdrawn.  These withdrawals have contributed to the turmoil on the financial markets this year. We can expect to see these withdrawals accelerate as investors scramble to avoid becoming a victim of another scam.

This is bad news for the derivatives’ market where hedge funds use the leverage accorded by such instruments to speculate on assets. Theses markets will leave other investors locked into illiquid instruments with it increasingly difficult to get out of them. Banks will be hit two as hedge funds will force banks to realise losses as they withdraw funds to meet redemptions by investors.

We can expect to see further declines in all markets with more losses and bailouts for the banks. Things have just become markedly worse for global capitalism and its markets.